Heirs of Mariano vs Naga City

Facts:
The officers of City Heights Subdivision wrote to the mayor of the City of Naga (City), offering to
construct the Naga City Hall within the premises of the Subdivision. Their letter indicated that the City
Hall would be built on an area of not less than two hectares within the Subdivision, which would be
designated as the open space reserved for a public purpose. Upon the City's request, the Subdivision
amended its offer and agreed to donate five hectares to the City. The area is a portion of the land
registered in the names of Macario Mariano and Jose Gimenez under TCT No. 671 measuring a total of
22.9301 hectares.

The amended offer was signed by Mariano and Gimenez to indicate their "conforme," together their
respective spouses. Thereafter, the Municipal Board adopted Resolution No. 89 accepting the
Subdivision's offer of donation and its proposed contract.

According to the City, the Mayor Imperial and the registered landowners, Mariano and Gimenez,
executed a Deed of Donation on August 16, 1954, whereby the latter donated five hectares of land
(subject property), two hectares of which to be used as the City Hall site, another two hectares for the
public plaza, and the remaining hectare for the public market. By virtue thereof, the City entered the
property and began construction of the government center. It also declared the five-hectare property in
its name for tax purposes. Subsequently, other government agencies and instrumentalities entered the
same property and built their offices thereon.

However, the heirs of Mariano (petitioners) aver that the plan to donate five hectares to the City did not
materialize as the contract to build the City Hall was not awarded to the Subdivision but to a another
contractor (Francisco Sabaria). This caused Mariano and officers of the Subdivision to meet with Mayor
Imperial to demand the return of the five-hectare lot as the condition for the donation was not complied
with. Mayor Imperial purportedly assured them that the City would buy the property from them. On May
14, 1968, Mariano instructed the Subdivision's President to make a follow-up on the City's payment for
the subject lot. The purchase, however, did not materialize. In 1971, Mariano died without receiving
payment from the City.

In 1976, a certain Tirso Mariano filed an action for partition of Mariano's estate. The action was opposed
by his widow, Irene, and their adopted children, Jose and Erlinda. Irene died in 1988. Jose's heirs and
Erlinda were declared as Irene's heirs.
Unlawful Detainer case

In 2003, Danilo Mariano, as administrator of Irene's estate, demanded upon then City Mayor of Naga,
Jesse M. Robredo, to vacate and return the subject property. When the City did not comply, petitioners,
as heirs of Jose and Erlinda, filed a Complaint for unlawful detainer against the City.
The MTC dismissed the complaint on the ground of lack of jurisdiction. It reasoned that the City's
defense, which involved a claim of ownership, removed the issue from the case of unlawful detainer.
The RTC reversed the dismissal and ruled in favor of petitioners by ordering the City of Naga and the
other government agencies occupying the subject property to vacate therefrom and pay back rentals to
petitioners.
On appeal, the Court of Appeals (CA), in an amended decision, overturned the RTC and upheld the
dismissal of the MTC. The CA thus concluded that the existence and due execution of the Deed of
Donation had been duly established, warranting the dismissal of the ejectment case. The CA also found
that petitioners' claim was barred by laches, noting that the City had been in open, public and adverse
possession of the subject property for 49 years at the time the ejectment case was filed.
Held:
Adjudication of ownership in an unlawful detainer case is merely provisional
1. The sole issue for resolution in an unlawful detainer case is physical or material possession of the
property involved, independent of any claim of ownership by any of the parties - possession de facto and
not possession de jure. When the defendant, however, raises the defense of ownership in his pleadings
and the question of possession cannot be resolved without deciding the issue of ownership, the issue of
ownership shall be resolved only to determine the issue of possession, or more particularly, to determine
who between the parties has the better right to possess the property. Nonetheless, the adjudication is
merely provisional and would not bar or prejudice an action between the same parties involving title to
the property.
2. In this case, the City, as the defendant in the unlawful detainer case, asserted ownership over the
subject property by virtue of an alleged donation made in 1954 by the landowners in its favor. In support
of this claim, the City proffered a copy of a Deed of Donation dated August 16, 1954.
Purported donation lacked the formalities required for validity
3. Donation of real property, which is a solemn contract, is void without the formalities specified under
the law. Particularly, Article 749 of the Civil Code requires that donation of real property must be
made in a public instrument to be valid.
4. The purported Deed of Donation submitted by the City cannot be considered a public document. While
it contains an Acknowledgment before a notary public, the same is manifestly defective as it was made
neither by the alleged donors (Mariano and Gimenez) and their respective spouses, or by the donee (the
City, through Mayor Imperial), but only by Lopez, et al. as the Subdivision's officers.
5. Said Deed also shows that Mayor Imperial affixed his signature thereon on August 21, 1954, or four
days after it was notarized, thus he could not have acknowledged the same before the notary public on
August 16, 1954. Verily, the notary public could not have certified to knowing the parties to the donation,
or to their execution of the instrument, or to the voluntariness of their act. This glaring defect is fatal to
the validity of the alleged donation. It is settled that a defective notarization will strip the document of its
public character and reduce it to a private instrument.
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6. Not being a public document, the purported Deed of Donation is void. A void or inexistent contract has
no force and effect from the very beginning, as if it had never been entered into. It is equivalent to
nothing and is absolutely wanting in civil effects. It cannot be validated either by ratification or
prescription. Void contracts may not be invoked as a valid action or defense in any court proceeding,
including an
ejectment suit.
7. Since void contracts cannot be the source of rights, the City has no possessory right over the subject
property. In this light, to resolve whether to admit the copy of the purported Deed of Donation as
secondary evidence will be futile as the instrument in any case produces no legal effect.
Circumstances controverting the City's right of possession based on the alleged donation
8. The City has, for more than 50 years since the donation supposedly took place on August 16, 1954,
failed to secure title over the subject property in its name. If the City had acquired ownership of the
premises, it is incredible that it would fail to register the donation and have the property titled in its name.
That it would remain passive for such length of time is confounding and does not serve to bolster its
proprietary or possessory claim to the property.
9. At the very least, the City should have caused the annotation of the alleged Deed on TCT No. 671
immediately after August 16, 1954 or shortly thereafter. Such inscription would have been binding on
petitioners, as Macario and Irene's successors-in-interest, as well as on third parties.
Petitioners, as heirs of a registered owner of the subject property, have the preferred or better
right of possession
10. Title to the subject property remains registered in the names of Macario and Gimenez. The alleged
Deed of Donation does not appear to have been registered and TCT No. 671 does not bear any
inscription of said Deed.
11. The Court has consistently upheld the registered owners' superior right to possess the property in
unlawful detainer cases.A fundamental principle in land registration is that the certificate of title serves as
evidence of an indefeasible and incontrovertible title to the property in favor of the. person whose name
appears therein. It is conclusive evidence as regards ownership of the land therein described, and the
titleholder is entitled to all the attributes of ownership of the property, including possession Thus, the
Court has time and again reiterated the age-old rule that the person who has a Torrens title over a parcel
of land is entitled to possession thereof.
12. It has likewise been constantly emphasized that when the property is registered under the Torrens
system, the registered owner's title to the property is presumed legal and cannot be collaterally attacked,
especially in a mere action for unlawful detainer. It has even been held that it does not even matter if the
party's title to the property is questionable.
13. It has been held that a certificate of title has a superior probative value as against that of an
unregistered deed of conveyance in ejectment cases. As against the City's unregistered claim, the
Torrens title in the name of Mariano and Gimenez must prevail, conferring upon the registered owners
the better right of possession. This superior or preferred right of possession applies to petitioners as
Mariano's hereditary successors who have stepped into said decedent's shoes by operation of law.
No automatic acquisition of ownership of open space in the subdivision
14. The City asserted that because the subject property had been designated as the open space of the
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City Heights Subdivision, intended for public use, ownership thereof automatically vested in the City, its
donation being a mere formality. The City disputed petitioners' claim that the road lots already donated to
the City satisfied the open space requirement for subdivisions prior to the enactment of PD 957, as
amended by PD 1216.
15. The 1948 Subdivision Regulations invoked by the City required a public open space in the
subdivision “suitable for parks, playgrounds, playlots and/or other recreational purposes.” The term
"open space" necessarily signifies the absence of buildings or edifices. The enumeration of parks,
playgrounds and playlots as the specified usage for such space buttresses the view that the area should
be non-buildable. The phrase "other recreational purposes" should be read in conjunction with this
enumeration and should thus be construed as usage akin to parks, playgrounds and playlots which have
clear and open space as their common feature. This is consistent with the principle of ejusdem generis
which provides that "where a general word or phrase follows an enumeration of particular or specific
words of the same class or where the latter follow the former, the general word or phrase is to be
construed to include, or to be restricted to persons, things or cases akin to, resembling, or of the same
kind or class as those specifically mentioned."
16. However, the subject property - Blocks 25 and 26 in the Subdivision Plan - had been designated not
as an open space, but as the sites for the City Hall and market. The subject property is in fact used as
the site of the City Hall and other government offices.
17. The City cannot successfully invoke the Subdivision Regulations as basis to demand vested
proprietary rights over the subject property. Contrary to its position that roads as well as open space in
subdivisions instantly belong to the government without need of compensation or any overt act of
donation, the Subdivision Regulations indicate that local governments did not automatically become the
owner of roads and open space in subdivisions within their jurisdiction and a positive act of conveyance
or dedication was necessary to vest ownership in the city or municipality
18. Even under PD 957, specifically Section 31, it was optional on the part of the owner or developer of
the subdivision to donate the roads and open space found therein. Furthermore, under PD 1216,
"(t)he-transfer of ownership from the subdivision owner-developer to the local government is not
automatic but requires a positive act from the owner-developer before the city or municipality can acquire
dominion over the subdivision roads," such that "until and unless the roads are donated, ownership
remains with the owner-developer. Subdivision streets belong to the owner-developer until donated to
the government or until expropriated upon payment of just compensation.
Petitioners cannot simply demand just compensation in lieu of recovering possession as there
was no expropriation
19. Invoking the case of Alfonso v. Pasay City, the City argued that recovering possession of the subject
property is no longer feasible because it is now occupied and used by the City Hall and other
government offices, so that petitioners' remedy is merely to demand payment of just compensation.
20. In the Alfonso case, the government took the property in the exercise of its power of eminent domain.
This case clearly involves a different factual milieu as the subject property was not expropriated by the
government. It had been offered by its owners-developers, under certain terms, for donation to the City
as the City Hall and market sites within the subdivision, which offer the City clearly had the option to
refuse. The City was not propelled by an imperative need to take the subject property for a public
purpose. The City, in taking possession of the subject property, was not exercising a sovereign
function-as expropriator. In this light, the Alfonso ruling cannot be applied to petitioners.
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The City is not entitled to the rights of a builder in good faith
21. By law, one is considered in good faith if he is not aware that there exists in his title or mode of
acquisition any flaw which invalidates it. The essence of good faith lies in an honest belief in the validity
of one's right, ignorance of a superior claim, and absence of intention to overreach another.
22. The City cannot be deemed a builder in good faith. The contract for the construction of the City Hall
by the Subdivision was an integral component of the latter's offer of donation, constituting an essential
condition for the intended conveyance. The owners also proposed a financing scheme for the
construction of the City Hall, the construction cost not to exceed P150,000. It is readily apparent that the
construction contract was the impetus for the offer of donation, and that such offer was made to
persuade the City to award the contract to the Subdivision.
23. The Municipal Board adopted Resolution No. 89 accepting the Subdivision's July 30, 1954 offer.
However, subsequently, the Municipal Board issued Resolution No. 11 authorizing the City Mayor to
enter into a contract with Sabaria for the construction of the City Hall. The City knew of a substantial
flaw
in its claim over the subject property. The proposed donation was conditioned on the award of the
construction contract to the Subdivision. By its Resolution No. 89, the City accepted the proposal with all
its conditions. Thus, the City could not have been unaware that by awarding the same construction
contract to Sabaria, it no longer had any cause to continue occupying the subject property as the
condition for the proposed donation had not been satisfied. Accordingly, it should have vacated the
subject property. However, it stayed on and allowed Sabaria to undertake the construction.
24. It cannot, thus, be said that the City was of an honest belief that it had a valid right to the subject
property or that its actions had not overreached the landowners. Accordingly, it cannot be considered to
have acted in good faith. Thus, petitioners, as hereditary successors of the registered owners of the
subject property, have the right to appropriate what has been built on the property, without any obligation
to pay indemnity therefor, and the City has no right to a refund of any improvement built therein.
Neither laches nor prescription had set in
25. Laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which,
by exercising due diligence, could or should have been done earlier; it is negligence or omission to
assert a right within a reasonable time, warranting the presumption that the party entitled to assert it
either has abandoned or declined to assert it. There is no absolute rule as to what constitutes laches or
staleness of demand; each case is to be determined according to its particular circumstances, with the
question of laches addressed to the sound discretion of the court. Because laches is an equitable
doctrine, its application is controlled by equitable considerations and should not be used to defeat justice
or to perpetuate fraud or injustice.
26. By his September 17, 1959 and May 14, 1968 letters, Macario has been shown to have taken steps
to have the City act on Mayor Imperial's proposal to "buy instead" the subject property. His efforts were
overtaken, by his death three years later in 1971. In contrast, the City, despite its claim of having
acquired the subject property by donation in 1954, has itself failed to have the same transferred in its
name for a long period of time. Indeed, the subject property remains registered in the name of
petitioners' predecessor-in-interest as co-owner.
27. The rule is that an action to recover possession of a registered land never prescribes in view of the
provision of Section 44 of Act No. 496 to the effect that no title to registered land in derogation of that of
a registered owner shall be acquired by prescription or adverse possession. It follows that a registered
owner's action to recover a real property registered under the Torrens System does not prescribe.
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28. It has been consistently held that registered owners have the right to evict any person unlawfully
occupying their property, and this right is imprescriptible and can never be barred by laches. Even if it be
supposed that they were aware of the occupant's possession of the property, and regardless of the
length of that possession, the lawful owners have a right to demand the return of their property at any
time as long as the possession was unauthorized or merely tolerated, if at all.
29. The rule on imprescriptibility of registered lands not only applies to the registered owner but extends
to the heirs of the registered owner as well. Consequently, petitioners, as heirs of registered landowner
Macario, cannot be barred by prescription from claiming possession of the property.
Restitution of premises, reasonable rent and attorney's fees
30. The rightful possessor in an unlawful detainer case is entitled to the return of the property and to
recover damages, which refer to "rents" or "the reasonable compensation for the use and occupation of
the premises," or the "fair rental value of the property" and attorney's fees and costs. More specifically,
recoverable damages are "those which the plaintiff could have sustained as a mere possessor, or those
caused by the loss of the use and occupation of the property.”
31. The RTC granted petitioners' prayer for a monthly rental of P2.5 million (or P50/sqm) as reasonable
compensation for the City's use and occupation of the subject property. However, the CA reduced the
monthly rental to P500,000 (or P10/sqm).
32. The reasonable compensation contemplated in Section 17, Rule 70 "partakes of the nature of actual
damages." While the court may fix the reasonable amount of rent, it must base its action on the evidence
adduced by the parties. The Court has defined "fair rental value" as the amount at which a willing lessee
would pay and a willing lessor would receive for the use of a certain property, neither being under
compulsion and both parties having a reasonable knowledge of all facts, such as the extent, character
and utility of the property, sales and holding prices of similar land and the highest and best use of the
property
33. Petitioners based their prayer for a P50 rental rate on the P110 monthly rent per square meter under
a 2004 lease contract over another property situated near the subject premises. The burden of proof to
show that the rental demanded is unconscionable or exorbitant rests upon the City. The City, however,
has not adduced controverting evidence as to the. fair rental value of the premises. All things considered,
the Court finds petitioners' prayer for compensation at less than half the rate indicated in said lease
contract to be reasonable.
34. The fair rental value is to be reckoned from the time of the demand to vacate. Thus, the reasonable
rent was due not from November 3, 2003 but from November 30, 2003, and should be paid until the
subject property is vacated.
35. The amount due to petitioners shall only be half of the reasonable rent as the subject property was
co-owned by Macario Mariano with Gimenez. Absent proof to the contrary, the portions belonging to the
co-owners in the co-ownership shall be presumed equal.
36. Petitioners were constrained to litigate to protect their interest. However, considering the
circumstances of the case, including the summary nature of an unlawful detainer proceeding, the Court
holds that an award of P75,000 as attorney's fees is fair and reasonable.

Decision is binding on privies or parties deriving possession from the City

37. The CA held that the government offices occupying the subject property, other than the City
government of Naga, could not be ordered to vacate the same because they were not parties to the case.
38. A judgment directing a party to deliver possession of a property to another is in personam. x x x Any
judgment therein is binding only upon the parties properly impleaded and duly heard or given an
opportunity to be heard. However, this rule admits of the exception, such that even a non-party may be
bound by the judgment in an ejectment suit where he is any of the following: (a) trespasser, squatter or
agent of the defendant fraudulently occupying the property to frustrate the judgment; (b) guest or
occupant of the premises with the permission of the defendant; (c) transferee pendente lite; (d)
sublessee; (e) co-lessee; or (f) member of the family, relative or privy of the defendant.
39. Exceptions (b) and (f) are clearly applicable. There is no dispute that the government offices were
allowed by the City to occupy the subject property. Deriving their possession from the City, they are
unmistakably the City's privies in the occupation of the premises. Thus, they too are bound by the
judgment in this case.

Determination of ownership is not conclusive

40. The ruling in this case is limited only to the determination of who between the parties has a better
right to possession. This adjudication is not a final determination on the issue of ownership and, thus, will
not bar or prejudice an action between the same parties involving title to the property, if and when such
action is brought seasonably before the proper forum